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Judge Delays Criminal Trial For Former Enron Executives

Defendants in Internet Unit Case Get 5-Month Extension

By Carrie Johnson
Washington Post Staff Writer
Thursday, September 2, 2004; Page E02

A federal judge in Houston yesterday agreed to postpone for five months the criminal trial of several former executives in Enron Corp.'s Internet division, one day after a leader of the unit pleaded guilty and agreed to cooperate with prosecutors.

U.S. District Judge Vanessa D. Gilmore said the trial, which had been scheduled to begin Oct. 4, should instead be reset for March 2005. The judge rescheduled the case late yesterday after defense lawyers said they needed more time to prepare because the lead defendants in the case -- chief operating officer Kevin P. Hannon and chief executive Kenneth D. Rice -- had both pleaded guilty to securities fraud charges in recent weeks.

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On Tuesday, Hannon told the judge that he had misrepresented the success of the fledgling Internet unit in 2000 and 2001, in part to "justify representations by senior management." Rice pleaded guilty in July and said he had acted with others to "falsely portray [the unit] as a successful venture and in turn, to positively influence Enron's stock price."

Both men are expected to serve as witnesses in the case against their former subordinates. They also could provide evidence about what the Houston energy company's indicted top leaders, Jeffrey K. Skilling and Kenneth L. Lay, knew about the failing broadband unit. Enron poured more than $1 billion into its high speed Internet division, and Skilling touted it highly in analyst conferences.

Lawyers for the other Enron Broadband Services officials -- former co-chief executive Joseph Hirko, vice president of finance Kevin Howard, accountant Michael Krautz and technical experts Scott Yeager and Rex T. Shelby -- had repeatedly sought to delay the trial. One of the lawyers told Judge Gilmore yesterday that he must go to trial soon on an unrelated case and that he would be unable to handle both the Enron case and the other trial at the same time.

The Justice Department's Enron Task Force has charged more than 30 people in connection with the company's December 2001 fall into bankruptcy. Fourteen targets of the long-running investigation have pleaded guilty.

For now, the first criminal trial of former Enron executives is set to begin Sept. 20. In that case, several former Enron and Merrill Lynch & Co. officials are accused of entering into an improper sale of energy-generating Nigerian barges. Prosecutors contend the deal helped Enron meet earnings targets in late 1999. Lawyers in that case, who also have asked for a postponement, are scheduled to appear in court today for a hearing.

Separately, Lay has been aggressively lobbying to go to trial before the November presidential election on 11 conspiracy, bank fraud and false statements charges. In an opinion piece in yesterday's Washington Post, Lay challenged the government to give him an "immediate and speedy trial on the charges I face." Prosecutors declined to respond to Lay yesterday but are scheduled to file court papers countering his request on Sept. 10.

U.S. District Judge Simeon T. Lake III has said he will rule on Lay's request in late September or October.


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